Only Four Days Left To Cash In On Chu Kong Shipping Enterprises (Group)'s (HKG:560) Dividend

It looks like Chu Kong Shipping Enterprises (Group) Company Limited (HKG:560) is about to go ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Chu Kong Shipping Enterprises (Group)'s shares before the 3rd of June in order to receive the dividend, which the company will pay on the 28th of June.

The company's next dividend payment will be HK$0.05 per share, and in the last 12 months, the company paid a total of HK$0.05 per share. Based on the last year's worth of payments, Chu Kong Shipping Enterprises (Group) has a trailing yield of 6.0% on the current stock price of HK$0.83. If you buy this business for its dividend, you should have an idea of whether Chu Kong Shipping Enterprises (Group)'s dividend is reliable and sustainable. As a result, readers should always check whether Chu Kong Shipping Enterprises (Group) has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Chu Kong Shipping Enterprises (Group)

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Chu Kong Shipping Enterprises (Group)'s payout ratio is modest, at just 49% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 26% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Chu Kong Shipping Enterprises (Group) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Chu Kong Shipping Enterprises (Group)'s 13% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Chu Kong Shipping Enterprises (Group) has lifted its dividend by approximately 2.3% a year on average.

To Sum It Up

Is Chu Kong Shipping Enterprises (Group) worth buying for its dividend? Chu Kong Shipping Enterprises (Group) has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Chu Kong Shipping Enterprises (Group)'s dividend merits.

While it's tempting to invest in Chu Kong Shipping Enterprises (Group) for the dividends alone, you should always be mindful of the risks involved. We've identified 2 warning signs with Chu Kong Shipping Enterprises (Group) (at least 1 which is concerning), and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.